Researcher ORCID Identifier

0000-0003-3096-2158

Graduation Year

2021

Date of Submission

11-2020

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Matthew Magilke

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2020 Giano A Stringfellow

Abstract

Most prior exploration of the relationship between diversity and firm performance consider various demographics when defining diversity, and only consider them among leadership. The goal of this paper is to understand how racial diversity specifically across a firm’s workforce impacts the firm’s financial performance. Firm performance is assessed through the following four accounting measures: market-to-book ratio, interest coverage ratio, operating profit margin, and return on assets. Racial diversity, the variable of interest in this analysis, is the percentage of non-White employees at the firm. Controlling for firm age, size, prior year returns, industry fixed effects, leverage, and capital structure, various regressions are run on each of the performance measures to assess the impact that racial diversity has on the performance of the firm. Ultimately, diversity had a slightly positive effect on firm performance up to a certain point, at which point the effect became negative. However, most of the results were statistically insignificant, so strong conclusions cannot be drawn. The analysis was constrained by small sample sizes due to a lack of data availability, so when the necessary data becomes available, further research can attempt to replicate the methods of this analysis.

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